Central Bank of Japan
The Bank of Japan maintained its ultra-loose monetary policy on Tuesday, in a widely expected move, underscoring the central bank’s policymakers’ preference to wait for more evidence on whether wages will rise enough to keep inflation near its 2 percent target.
The Japanese central bank also made no change to its dovish policy guidance in which it pledged to take additional steps to ease monetary policy “without hesitation” if necessary.
Markets are focused on any hints Governor Kazuo Ueda gives in his post-meeting briefing on when the central bank could end its negative interest rate policy.
At the two-day meeting that ended Tuesday, the Bank of Japan kept its short-term interest rate target at -0.1 percent, and kept 10-year government bond yields at around 0 percent. It also left unchanged the 10-year yield curve control criteria at 1.0 percent.
“There is too much uncertainty surrounding the Japanese economy and prices,” the Bank of Japan said in a statement.
Governor Ueda is expected to hold a press conference at (0630 GMT) to explain the policy decision.
Japan has seen inflation hold above 2 percent for more than a year, and some companies have signaled a willingness to continue raising wages, raising the chance of a policy shift in the near term.
In July, the Bank of Japan loosened its grip on long-term borrowing costs by raising the maximum limit set for the 10-year bond yield. The cap was relaxed to a loose reference in October in a sign that Ueda is moving steadily toward dismantling his predecessor’s radical stimulus.
More than 80 percent of economists polled by Reuters in November expect the Bank of Japan to end its negative interest rate policy next year, and half of them expect April to be the most likely timing. Some see an opportunity for a policy shift in January.
Analysts say the Bank of Japan may find it easier to act in months like January and April, when it releases a quarterly forecast report that includes new growth and price expectations.
But the sharply changing global monetary policy environment may complicate the Bank of Japan’s decision, with US and European central banks signaling that they have finished raising interest rates.
Analysts say that raising interest rates at a time when other central banks are cutting rates could lead to a rise in the yen, which could hurt the profits of major manufacturers and discourage them from raising wages.
Political factors are also complicating the Bank of Japan’s policy path, with persistent inflation blamed for Prime Minister Fumio Kishida’s approval rating falling to historic lows.
2023-12-19 03:37:58
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